The OTA’s Attempt at Discrediting the Value of the Hotel’s Direct Channel

By Max Starkov, President & CEO at HEBS Digital

Background:

Earlier this week, the European Technology and Travel Services Association (ETTSA) released a report called "Hotel Distribution Costs," examining the costs associated with direct and indirect distribution channels for hotels, together with the impact of channel shift.

ETTSA is an organization "representing and promoting the interests of global distribution systems (GDSs) and travel distributors (read: OTAs), towards the industry, policy-makers, opinion formers, consumer groups and all other relevant European stakeholders."

The report, prepared by a consultancy called Infrata, concluded that hotels that attempt to boost direct bookings at the expense of agencies and OTAs risk having lower occupancy rates with "no measurable" savings on costs, and suggested the main reason for hoteliers to push direct sales is to "reduce transparency for consumers."

The ETTSA report uses "a magic wand" to convince the naïve or whoever is listening that hoteliers would be much better if they abandon their useless direct distribution efforts and rely on the OTAs for their distribution. The report's highly selective "analysis":

  • Dramatically overstates the effect of the much discredited "OTA Billboard Effect"— remember the unfortunate Cornell University "study," financed by the OTAs? This study, disproved many times over, tried to convince hoteliers that they should use OTAs in order to generate more bookings from the property's own website, due to the so-called "Billboard Effect."
  • Underestimates the complexity of the online travel consumer journey: Today's travel consumer engages in 38,983 digital micro-moments in just under two months, and the average travel consumer journey takes about 17 days, eight research sessions, 18 site visits, and six clicks before making a hotel booking (Google Research).
  • Tends to over-estimate the hotel's direct distribution costs and undervalue OTA distribution costs, which go beyond the OTA commissions, and include costs associated with revenue management, APIs, GDS, CRS and channel management systems, etc. OTA channel management alone occupies an increasing share of the revenue manager's bandwidth, which means rising payroll and benefit expenses.
  • Does not account for the fact that direct booking costs are fixed, while OTA distribution costs are percentage of room revenue and grow with higher ADRs or longer length of stay (LOS).
  • Makes the rather offensive claim that hoteliers' direct booking campaigns are motivated by the hotelier's desire to "decrease customer transparency."

Read the full article on Hospitality Net

Marriott and Hilton’s Group Commission Cuts Put Pressure on Industry

As hotel chains have shifted their business models over the last decade, keeping owners happy has become the priority. Slashing group booking commissions for intermediaries saves owners money, so it’s easy to see how the largest U.S. chains will follow the example of Marriott and Hilton in the near future.
— Andrew Sheivachman

Travel agents and meeting planners are becoming the latest group to feel the pressure from hotel industry consolidation.

A decision by Marriott International, with Starwood Hotels in its fold now, to cut group hotel commissions was soon followed by Hilton Worldwide. Marriott has already reduced commissions on North American group hotel bookings to 7 percent, from 10 percent, demonstrating that hotel chains won’t be afraid to put pressure on travel agents and meeting planners in the future (Hilton’s cut will go into effect later this year). It will also likely mean increased costs for corporations and groups that hold events at hotels as agents and planners pass on costs to them as they grapple with the commission cuts from hotels.

“We want to make sure we have [a policy] that is fair and equitable, and we felt this is the right [move],” Brian King, Marriott International’s global officer of digital, distribution, revenue management, and global sales, told Skift. “There was some rumor going around that commissions would be cut to zero, [but that was never an option]… any time a business model shifts, [agents and planners] need to recalibrate their business, but by the same token we’re also encouraging planners to move to a different, [more transparent] planning model.”

....

RISING COSTS

Although not everyone agrees that it comes down to ownership issues. Hotels used to have meeting planners on staff to deal with the booking and planning of events; this process has become outsourced to a variety of third-party planners, venue sourcing organizations, and now a variety of online booking sites for small group events.

“The value chain swung from one side to the other, and a focus on cost became much more of a spotlight issue,” said Cindy Estis Green, CEO of Kalibri Labs, a hotel benchmarking firm. “Hotels have been paying more for the same business, there’s been a spike in costs for relatively flat group business.  They’re getting the same business and having to pay double or triple for it.”

In Estis Green’s estimation, tension has been building up in the ecosystem for more than five years.

Kalibri Labs recently released a report crunching the numbers on the costs hotel pay for group business. Its analysis found that larger hotels, which generate the most group business revenue, pay the largest cost as a percentage of group revenue for groups and meetings business.

skift g&m.PNG

“Big hotels write the biggest checks,” said Estis Green.

The commission cuts are related to the cost of customer acquisition for a hotel’s group business; an abundance of factors, from planners and agents to city housing fees and overall technology costs, drive up the cost of a booking for hotels, and this has led the brands to cut costs.

Kalibri Labs suggests that the costs paid out to companies involved in group bookings could double for U.S. hotels by 2022.

Read the full article on Skift

At AAHOA, hoteliers learn how expensive it is to acquire customers

NATIONAL HARBOR, Md. — It’s no longer enough for hoteliers to set targets for revenue in 2018. Now they should be setting targets for the cost of making sales. That’s the message Cindy Estis Green, CEO and co-founder of hotel revenue performance analyst Kalibri Labs, delivered tthis week at the Asian American Hotel Owners Association's 2018 annual conference, here at the Gaylord National Resort & Convention Center.

According to Green, hotels earned roughly $155.2 billion in guest-paid revenue in 2017. But in order to make that money, hotels spent an estimated $25.2 billion to acquire guests, retaining a significantly lower $130 billion (a metric Kalibri Labs refers to as “revenue capture”). Vast swaths of these expenses are impossible to avoid, but many are the product of online travel agency fees and other concerns, which, with a little bit of strategizing, can be mitigated.

One way hotels are managing this is by promoting direct bookings. In 2017, Green said hotels pulled in 22.6 of their overall bookings from brand.com, while OTAs brought in only 13 percent. At first blush, this seems like a remarkably positive trend, but hotels’ revenue capture actually decreased from 2015 to 2016. In 2015, hotels’ revenue capture was recorded at 84.3 percent, but it fell to 83.8 percent the following year. These metrics, however, were recorded before the hotel industry began a concerted push to increase direct bookings.

“The book-direct campaigns are big, and have been very effective at increasing brand business,” Green said. “Brand business will always be better for your bottom lines, and the health of the industry.”

Revenue capture is the revenue hotels retain after spending to acquire guests.

Green anticipates revenue capture will decline again in 2018, although there may be hope. Kalibri Labs reported performance in brand.com sites is forecast to improve 5.4 percent in 2018, while voice-based bookings will grow 3.8 percent. However, property-direct bookings are forecast to be down 7.5 percent, while OTAs are expected to increase 8.1 percent and global distribution systems will be up a meager 0.6 percent.

Read the full article on Hotel Management

Hilton Joins Marriott in Slashing Planner Commissions

Second major hotel chain will cut third-party planners' rate to 7 percent from 10

Danny-Hughes-Hilton.png

Hilton Hotels & Resorts today announced that it is following Marriott's lead and cutting the commission it pays to third-party meeting planners who book business at its U.S. and Canadian hotels from 10 percent to 7 percent, effective Oct. 1. Existing business booked before then will not be affected. 

In announcing the commission cut, Hilton senior vice president and commercial director, Americas, Danny Hughes (pictured), said that while his company recognizes, "the important and integral role" third-party planners play in its meetings and events business, "in light of growing group distribution costs and the complexity of intermediary [third-party] services offered, Hilton has revised its base group sales commission rate."

Still, Hilton has provided six months lead time until the new commissions plan comes into place, giving planners and their clients time to adjust to the new structure. Since the Marriott announcement, there has been some discussion in the industry that the commission model might not be the best way for third party planners to price their services.

Hughes adds, "We are respectful of how the changes that are being made impact our partners, and we took that under careful consideration as we planned for this update. What we're really focused on right now is a better way to balance the needs of all parties involved, enabling our owners to invest more in meaningful innovations that will drive more happy guests and more meetings to our hotels."

Hilton's plan is also not mandatory for all properties, Hughes confirmed, noting that the company "is changing its base group sales commission rate, which will be applicable to commissions paid by Hilton and at participating hotels in the U.S and Canada. As with many other Hilton programs, we anticipate a high degree of participation in this program."

"It's a sad day in the industry, round 2," said David Bruce, managing partner of CMP Meeting Services, who reacted to Marriott's move by quickly forming an organization that is in the process of turning into an industry association for small third-party companies and individuals, Meeting Planners Unite. 

"It's a shame Hilton is following suit with Marriott and not looking out for relationships Hilton has had with the third-party market for quite some time," he added. "You do business with the people you trust. Here is another example of a chain forgetting who buttered their bread for so many years."

Hughes says Hilton's move is necessary in order to "balance the needs of all parties," adding that the reason for the cut is easing the costs that hotel owners pay for group business. That, "will allow our owners, over time, to make further investment in products and offerings that enhance the guest experience."

He points to a new report by research firm Kalibri Labs that found the cost of group business acquisition has risen dramatically in the past five years, to more than $4 billion, and is expected to reach $8 billion to $10 billion in the next five years. "The total costs can reach upwards of 35 percent of room revenue per group when all costs are considered," Kalibri said in its report. 

Read the full article on Successful Meetings

Hilton Follows Marriott's Lead on Commission Cuts

 Danny Hughes, Hilton's senior vice president and commercial director for the Americas

Danny Hughes, Hilton's senior vice president and commercial director for the Americas

Two months following Marriott International's announcement that it would reduce group-intermediary commission rates to 7 percentHilton has announced it will do the same. Hilton is providing third parties with more notice than its competitor, however. Group business booked by intermediaries at participating hotels in the U.S. or Canada on or after Oct. 1, 2018, will be subject to Hilton's new base commission rate of 7 percent. Business booked before then will be honored at the commission rate previously contracted.

That Hilton refers in its statement to "participating hotels" indicates the change isn't mandatory for all properties. "We're changing our guidelines on the commission rate," explained Danny Hughes, Hilton's senior vice president and commercial director for the Americas. "But I can tell you that, like so many programs we have, we anticipate a huge amount of participation in this. It's a discussion point we've been having with owners for a long, long time now. I'm confident it will be very high participation."

The decision is a result of growing group-distribution costs and the complexity of intermediary services offered, according to Hughes. "This is truly something that is good for everybody," Hughes continued. "Whilst the move might be initially met with some frustration, the one thing we all share - whether it be the hotel, whether it be us as the brand, whether it be the third-party meeting planners - the one thing we are all totally aligned on is that we thrive when great meetings happen in our hotels. And that's what this is going to help facilitate. It's going to allow owners to actually make investments in both the physical product and in new innovations that are coming along, and of course, great, great service - and hopefully that's going to mean more and more meetings, which is good for everybody. That's really the crux of why we're doing this."

When asked about exemptions or delayed timelines for certain large third-party intermediaries, a Hilton spokesperson reiterated that the updated group-commission rate structure applies to all new group business in the U.S. and Canada booked on or after Oct. 1. "Like any company, Hilton has strategic partnerships and agreements with certain organizations, the details of which are confidential," the spokesperson added.

According to Hughes, Hilton felt this was the right time to address the problem of rising distribution costs and attempt to strike a balance. "It's a complicated ecosystem," he noted, and referred to a recent study from Kalibri Labs, titled "U.S. Groups & Meetings: The Economics and Complexity of Intermediation." "There are some interesting findings - there are more acquisition costs that have been creeping in. It's not just the third-party commissions now, there are channel costs, there are housing-bureau fees, there are reservation fees, there are loyalty-planner points and attendee-loyalty points. You've got all these extra acquisition costs, as well as the proportion of business that's going through third parties. It's been growing rapidly, and if the trajectory remains the same, it will soon be 60 percent of the business going into hotels that is intermediated. And all of these things have costs.

"Ultimately, it's a competitive world," Hughes continued. "We need to provide incredible facilities in our hotels to actually attract meeting planners. And that takes investment."

Hughes does not, however, want to discourage independent planners from booking Hilton. "We value the third parties," he said. "They provide a valuable service that's an integral part of the operation, and nothing about what we're doing is trying to decrease the amount of third parties or their business that comes through. We do think the costs need to be rebalanced a little bit. But we absolutely value them, and will continue to extend a hand of friendship and cooperation to the third parties."

Following Marriott's announcement, there has been a good deal of talk about whether the commission model itself is unsustainable and will remain. Hilton's future plans regarding commissions are unclear. "We certainly analyze all the time our distribution strategies and costs and are constantly reevaluating them," explained Hughes. "There's been a lot of thought put into this, and we felt that this is the time to redress the balance of the costs, and this is the appropriate and fair new commission level. How that will change over time, I don't know. We certainly have not planned right now to make any further cuts or changes."

Hughes wants independent planners to know that Hilton has every desire to continue working with them. While Marriott last month canceled a meeting with Meeting Planners Unite founder David Bruce, citing antitrust concerns, Hughes said he wouldn't eliminate out of hand any discussion possibilities if asked. "I can tell you that every request to meet we look at on its own individual merits and see if it's appropriate," he said, "and we'll certainly apply that same openness to any request to meet, from any party. (David Bruce also discussed the matter today with M&C.)

"We respect the place that third-party planners have in the industry," Hughes added. "And we'll continue to do so. We think it's an important range of services. I truly believe the more we can work together to have more great meeting facilities, the more we all truly benefit."

Read the full article on Meetings & Conventions

Diminishing returns: The growing impact of group commissions on profits (Part I)

As an industry, we have dedicated a considerable amount of time discussing and debating the impact of OTAs and in particular, market share and costly commission structures. This stands to reason, as transient business (including corporate and leisure guests) booking through these channels represent the lion’s share of room nights for hotels. However, the issue of intermediaries and costs related to group business is of equal concern, and in some cases represents even higher commissions that continue to increase at a significant pace.

In a recent blog post, Attack of the silent profit killers, I touched on this issue: “Across our big-box hotels (15), we have seen staggering increases in group commissions in 2017, with minimal growth in group rates and ancillary spend, creating a double hit to profitability. To provide a sense for the impact, group commissions for one of the convention hotels in our asset management portfolio increased nearly 27% year-over-year, representing a US$700,000 increase YTD through September. As a percentage of group room sales, this property experienced an increase of more than a point, representing 10% of total group revenue… alarming.”

Today, we have some new data on the subject that further validates my concerns. No other organization has dedicated more time and expertise to highlight the impact of intermediary expenses and develop specific tools to help navigate this new landscape than Kalibri Labs, which recently published a special report entitled U.S. Groups & Meetings: The Economics and Complexity of Intermediation, which speaks to this very issue.  

Highlights from the study:

  • Current group and meetings business in the U.S. approximates US$300 billion;
  • Of which, US$140 billion is spent on rooms;
  • Of which, US$30 billion represents room rental revenue, and the balance spent on F&B, ground transport, audio visual and other ancillary requirements; and,
  • Bringing this down to the property level, groups and meeting represents on average 15% of room nights across all segments, but in the 30% to 35% range for full-service hotels (with ADRs of $220 or more).

The study goes on to share that small meetings, defined as requiring under 100 rooms on the peak night, make up almost three-fourths of the meetings in the U.S. (although only 28% of meetings revenue). Key take away here: smaller meetings, lots of sales effort and unique space requirements needed.

The increasing role of intermediaries in group business is further compounded by the “groups and meetings ecosystem … which entails a complex process from the point at which an event is contemplated through to its execution … many intermediaries involved at various points in the value chain which adds to the process’ fragmentation and ultimately its costs.”

Just how much are these intermediaries costing hotel owners?

  • In 2017, 43% of group business was intermediated (versus booked direct), and is projected to increase to 60% by 2022;
  • Cost of acquisition has risen dramatically over the past five years, paying from 15% to 35% for many pieces of group business, and could conceivably double by 2022;
  • Group booking intermediation is expected to evolve further to include a combination of third-party planners and third-party technology providers, so the rate of intermediation will grow; and,
  • A larger percentage of smaller-sized groups (remember those representing three-quarters of group rooms booked!) will be sold through intermediaries.

What do I think brands/operators should do about it?

  • Major brands should continue to leverage their size and scale to negotiate lower group intermediary commission rates and fees. Marriott International was the first to step up to this challenge, lowering commissions 3 points, effective March 31, 2018. Owners hope that other brands will follow suit.
  • As the Kalibri study suggests, now is the time for the hotel industry to introduce “digital processes that improve work flow and customer experience and consider ways to avoid commoditizing the meeting experience.” Specifically, seek opportunities to increase ease of booking and establishing pathways and methodologies to reduce costs. This sounds like a call for investment in technology to me and it’s the brands that need to step up to make this happen, not only for owners but also to stay relevant themselves.

Read the full article on HOTELS Magazine

Study: Increased Intermediation in the Groups & Meetings Segment

ROCKVILLE, MD—Kalibri Labs has released its latest hotel industry study, which encompasses the groups and meetings market segment. The report highlights that groups and meetings business in the U.S. represents approximately $300 billion, with about $140 billion spent in hotels. Of this $140 billion in hotel spend, about $30 billion represents room revenue, with F&B, ground transportation, AV and other ancillary requirements making up the balance.

The report shows that groups and meetings business is about 15% of total U.S. room nights across the full spectrum of hotel segments. Full-service hotels at the higher end of the rate range (those over $220 published rates) have 30-35% of their room nights generated by groups and meetings business. Small meetings, defined as requiring under 100 rooms on the peak night, make up almost three-fourths of the meetings in the U.S.; however, this represents just over one-fourth of the meetings revenue (28%). The balance of revenue is split between meetings requiring between 100-499 rooms (33%) and those over 500 rooms (39%).

The complexity of the groups and meetings ecosystem is put on display in the report and details the process from the point at which the concept of the event is conceived through to its execution. There are many intermediaries involved at various points in the value chain, which adds to the process’ fragmentation and, ultimately, to its costs. Cost of customer acquisition has risen dramatically over the last five years as the proportion of intermediated events has increased, equating to over $4 billion in 2017 and is expected to reach close to $8 billion to $10 billion by 2022, according to the company. The total costs can reach upwards of 35% of room revenue on many pieces of group business when all third-party commissions and other booking costs are considered.

The report also reveals that automation has entered many aspects of the groups and meetings sourcing, booking and execution process over the last five years and is accelerating, but it hasn’t always made the process more efficient for those involved.

Cindy Estis Green, CEO and co-founder of Kalibri Labs, said, “With this renewed attention, the next two to three years appear to be an inflection point in the way the groups and meetings process will evolve. Operators with hotels of all sizes should pay heed to the costs and processes in place as they are likely to affect all events from the smallest social events to the largest corporate and association meetings. An open and robust dialogue on how to improve the efficiency of this ecosystem would benefit all involved to improve the overall guest experience and reduce costs for all parties.”

Read the full article on Hotel Business

Cost of customer acquisition risen dramatically in groups and meetings market

The total costs can reach upwards of 35% of room revenue on many pieces of group business when all third-party commissions and other booking costs are considered, according to a new report by Kalibri Labs.

Kalibri Labs just announced the release of their latest hotel industry study that encompasses the groups and meetings market segment. This in-depth look at a critical component of the industry’s business mix is the first of its kind and filled with detailed insights and key metrics which reveal increased intermediation in the groups and meetings segment.

The report highlights that groups and meetings business in the U.S. represents approximately $300B, with about $140B spent in hotels. Of this $140B in hotel spend, about $30B represents room revenue, with F&B, ground transportation, AV and other ancillary requirements making up the balance.

The report shows that groups and meetings business is about 15% of total U.S. room nights across the full spectrum of hotel segments. Full service hotels at the higher end of the rate range (those over $220 published rates) have 30-35% of their room nights generated by groups and meetings business. Small meetings, defined as requiring under 100 rooms on the peak night, make up almost three-fourths of the meetings in the U.S., however this represents just over one-fourth of the meetings revenue (28%). The balance of revenue is split between meetings requiring between 100-499 rooms (33%) and those over 500 rooms (39%).

The complexity of the groups & meetings ecosystem is put on display in the report and details the process from the point at which the concept of the event is conceived through to its execution. There are many intermediaries involved at various points in the value chain which adds to the process’ fragmentation and ultimately to its costs. Cost of customer acquisition has risen dramatically over the last 5 years as the proportion of intermediated events has increased, equating to over $4B in 2017 and is expected to reach close to $8-10B by 2022. The total costs can reach upwards of 35% of room revenue on many pieces of group business when all third-party commissions and other booking costs are considered.

The report also reveals that automation has entered many aspects of the groups & meetings sourcing, booking and execution process over the last five years and is accelerating but it hasn’t always made the process more efficient for those involved. Cindy Estis Green, CEO and Co-founder of Kalibri Labs, says that, “with this renewed attention, the next 2 to 3 years appear to be an inflection point in the way the groups & meetings process will evolve. Operators with hotels of all sizes should pay heed to the costs and processes in place as they are likely to affect all events from the smallest social events to the largest corporate and association meetings. An open and robust dialogue on how to improve the efficiency of this ecosystem would benefit all involved to improve the overall guest experience and reduce costs for all parties.”


Read the full article on HotelMarketing

Kalibri Labs Report Reveals Increased Intermediation in the Groups and Meetings Segment

A new Kalibri Labs report reveals increased intermediation in the groups and meetings segment of the hotel industry, the associated costs, and future projections. The analysis sheds light on the challenges imposed by a fragmented ecosystem with a focus on costs and the impact on relationships between hotels and their customers.

Groups and meetings business in the United States totaled approximately $300 billion in spending last, with about $140 billion spent in hotels. Of this hotel spend, about $30 billion represents room revenue, with F&B, ground transportation, AV, and other ancillary requirements making up the balance.

The report shows that groups and meetings business is about 15 percent of total U.S. room nights across the full spectrum of hotel segments. Full service hotels at the higher end of the rate range—those over a published rate of $220—have 30 to 35 percent of their room nights generated by groups and meetings business. Small meetings—those under 100 rooms on the peak night—make up almost three-fourths of the meetings in the U.S., however this represents just over one-fourth of the meetings revenue (28 percent). The balance of revenue is split between meetings requiring between 100 and 499 rooms (33 percent) and those over 500 rooms (39 percent).

Rising Customer Acquisition Costs

The report also details the meetings and events process—from when the event is conceived through its execution. The many intermediaries involved at various points adds to the process’ fragmentation and, ultimately, to its costs. Cost of customer acquisition has risen dramatically over the last five years as the proportion of intermediated events has increased, equating to over $4 billion in 2017. Customer acquisition costs are expected to reach close to $8 to 10 billion by 2022. The total costs can reach upwards of 35 percent of room revenue on many pieces of group business when all third-party commissions and other booking costs are considered.

Automation in Groups and Meetings

Automation has entered the sourcing, booking, and execution processes for groups and meetings over the last five years. However, it hasn’t always made the process more efficient for those involved. “With this renewed attention, the next two to three years appear to be an inflection point in the way the groups and meetings process will evolve,” Cindy Estis Green, CEO and co-founder of Kalibri Labs, says. “Operators with hotels of all sizes should pay heed to the costs and processes in place as they are likely to affect all events from the smallest social events to the largest corporate and association meetings. An open and robust dialogue on how to improve the efficiency of this ecosystem would benefit all involved to improve the overall guest experience and reduce costs for all parties.”

Read the full article on Lodging Magazine

A New Kalibri Labs Special Report Reveals Increased Intermediation in the Groups and Meetings Segment of the Hotel Industry, the Associated Costs and Future Projections

A New Kalibri Labs Special Report Reveals Increased Intermediation in the Groups and Meetings Segment of the Hotel Industry, the Associated Costs and Future Projections

ROCKVILLE, MD. (PRWEB) MARCH 14, 2018 - Kalibri Labs just announced the release of their latest hotel industry study that encompasses the groups and meetings market segment. This in-depth look at a critical component of the industry’s business mix is the first of its kind and filled with detailed insights and key metrics which reveal increased intermediation in the groups and meetings segment.

The report highlights that groups and meetings business in the U.S. represents approximately $300B, with about $140B spent in hotels. Of this $140B in hotel spend, about $30B represents room revenue, with F&B, ground transportation, AV and other ancillary requirements making up the balance.

The report shows that groups and meetings business is about 15% of total U.S. room nights across the full spectrum of hotel segments. Full service hotels at the higher end of the rate range (those over $220 published rates) have 30-35% of their room nights generated by groups and meetings business. Small meetings, defined as requiring under 100 rooms on the peak night, make up almost three-fourths of the meetings in the U.S., however this represents just over one-fourth of the meetings revenue (28%). The balance of revenue is split between meetings requiring between 100-499 rooms (33%) and those over 500 rooms (39%).

The complexity of the groups & meetings ecosystem is put on display in the report and details the process from the point at which the concept of the event is conceived through to its execution. There are many intermediaries involved at various points in the value chain which adds to the process’ fragmentation and ultimately to its costs. Cost of customer acquisition has risen dramatically over the last 5 years as the proportion of intermediated events has increased, equating to over $4B in 2017 and is expected to reach close to $8-10B by 2022. The total costs can reach upwards of 35% of room revenue on many pieces of group business when all third-party commissions and other booking costs are considered.

The report also reveals that automation has entered many aspects of the groups & meetings sourcing, booking and execution process over the last five years and is accelerating but it hasn’t always made the process more efficient for those involved. Cindy Estis Green, CEO and Co-founder of Kalibri Labs, says that, “with this renewed attention, the next 2 to 3 years appear to be an inflection point in the way the groups & meetings process will evolve. Operators with hotels of all sizes should pay heed to the costs and processes in place as they are likely to affect all events from the smallest social events to the largest corporate and association meetings. An open and robust dialogue on how to improve the efficiency of this ecosystem would benefit all involved to improve the overall guest experience and reduce costs for all parties.”

For the full report and analysis, please visit the following link to download: kalibrilabs.com/groups

Read the full press release on Cision PR web

Report: Intermediaries Contribute to Meetings Costs & It Will Only Get Worse

By: Julie Sickel

The cost to hotels for groups and meetings has been on the rise in the U.S. in recent years. According to a report from hotel benchmarking company Kalibri Labs, the cost, if left unchecked, likely will double by 2022.

The report, titled U.S. Groups & Meetings: The Economics and Complexity of Intermediation, estimates that groups and meetings cost the U.S. hotel industry $3.4 billion to $4 billion in 2017. Commissions paid to intermediaries accounted for $1.3 billion of that, based on a 10 percent commission rate. By 2022, the cost could reach $8 billion or $10 billion, according to projections from Kalibri Labs, PwC and Oliver Wyman.

Kalibri serendipitously released some early findings from its research in January, just before Marriott International announced its intention to cut groups and meetings commissions in the U.S and Canada from 10 percent to 7 percent by March 31. But even with the largest hotel company in the world pledging to lower the money it pays out to intermediaries, Kalibri co-founder and CEO Cindy Estis Green said that, at the rate intermediation is growing, Marriott's move isn't enough to alter future projections.

The Solutions & Tech Problem

The ways in which organizations book groups and meetings with hotels is largely unchanged from where it was 40 years ago, according to the report. What has changed is the number of vendors who provide services and solve for pain points in a stagnant process. Typically, they exist in the first four stages of the meetings process: discovery, sourcing and booking, planning, and execution.

Of the approximately 100,000 meeting planners in the U.S., according to PwC's estimates, 20 percent are external planners who aren't directly employed by the organizations they assist. One-third of those external planners are employed by one of six major firms: HelmsBriscoe, ConferenceDirect, American Express Meetings & Events, Experient, Maritz Travel and BCD Meetings & Events.

Tech companies also have emerged to assist with discovery, sourcing, planning, and execution, including Cvent, Etouches, Groupize, Groups360 and Cendyn. While certain steps of the process are now being supported, Estis Green said, the solutions provided by third parties are still contributing to a broken system. For example, while automation can solve for the RFP process on the meeting host side, it increases the labor costs for hotels, which get inundated with high volumes of queries. "The groups and meetings market is very diverse," Estis Green said. "There are a lot of tech companies that are interested in aggregating it, the way transient business has aggregated over the last 15 years, and it's more complicated than the transient business. There's more to it. The process is more complex."

Approximately 43% of group rooms revenue is being intermediated. By 2022, Kalibri estimates, that portion will grow to 60 percent.

The Threat of Commoditization

Beyond the dollars and cents impact of increased intermediation, Estis Green warned, "If hotels become a commodity for the groups and meeting experience, the quality of the experience will deteriorate." It becomes less about finding a unique and engaging space and more about finding "a box."

"For hotels to be sharp and tuned in to what their customers want, they need to know their customers really well," Estis Green said, which is harder the more intermediaries step in between the two sides.

She hopes the report will help the industry recognize the need to change the meetings ecosystem. "In order to make it more efficient," she said, "all of the players in the food chain may have to give a little to make it work better."

Read the full article on Business Travel News

Poised for growth: Kalibri Labs adds two seasoned hospitality executives to its leadership team

The next-generation hotel benchmarking company’s business development team expands to deliver property, brand and industry insights to hotel decision makers.

Kalibri Labs is pleased to announce the addition of David Attardi as Senior Vice President, Sales and Marketing, and Jennifer Hill as Vice President, Business Development. Kalibri Labs, a big data and analytics firm for the hospitality industry has built a digital platform to evaluate and predict revenue performance.

Attardi and Hill join an impressive team already in place at Kalibri Labs, bringing with them the perspective and extensive hands-on hotel and real estate knowledge to enable hotel owners and operators to leverage Kalibri Labs’ toolkit for evaluating and improving profit contribution.

David and Jennifer bring a combination of practical industry knowledge and revenue strategy know-how to add value for client adoption. We are excited to roll out Hummingbird PXM and our real estate insights reports with greater scale going forward
— Cindy Estis Green, CEO and Co-founder

Prior to joining Kalibri Labs, Attardi served as Vice President of Lodging Development for Red Lion Hotels Corporation leading the company’s aggressive pursuit of franchise growth on the east coast. Prior to that, he operated as Vice President of Interactive Marketing at B. F. Saul Company, in charge of all the organization’s online and offline channel distribution. Over the years Attardi has been heavily involved in many industry organizations, such as IHG Owners Association’s Emerging Leaders Council, Marriott eCommerce Franchise Committee, and Board member of the Washington, DC chapter of HSMAI.


Hill comes to Kalibri Labs most recently from Highgate where she served as Regional Director of Revenue and Distribution. She has over 17 years of direct hotel operations and revenue experience at an array of branded and independent properties. Hill is an active member of the Advisory Board for the Washington DC chapter of HSMAI; has been recognized as one of the Top 25 Minds in Sales, Marketing and Revenue Optimization in 2017; and was awarded the HSMAI Revenue Management Professional of the Year in 2014.


This powerful combination of experience brings depth and breadth of industry perspective to the Kalibri Labs’ portfolio of products, specifically Hummingbird PXM, a hotel revenue strategy platform. Hummingbird PXM delivers insights to hotel owners and operators focused on revealing opportunities by channel, rate category and travel agency to grow a hotel’s profit contribution.

“We have spent the last 5 years building our database to over 30,000 hotels with details of daily transactions and their cost of acquisition supplemented by critical external data points including Airbnb supply and demand, consumer review indices and loyalty contribution,” said Cindy Estis Green, CEO and Co-founder of Kalibri Labs. “David and Jennifer bring a combination of practical industry knowledge and revenue strategy know-how to add value for client adoption. We are excited to roll out Hummingbird PXM and our real estate insights reports with greater scale going forward.”


In addition to the Hummingbird PXM digital platform, Kalibri Labs offers a variety of dynamic reports and analysis that leverage its next generation net revenue metrics through the lens of real estate development, asset acquisition/disposition, financing and valuation. By understanding a hotel’s ‘revenue capture,’ or how much revenue a hotel keeps of what the guests pay, owners, developers, brokers and lenders can more accurately assess a hotel’s position in the market and the impact of the property’s distribution channel mix on its profit contribution and ultimately on its valuation.

ABOUT KALIBRI LABS
Kalibri Labs evaluates and predicts revenue performance in the digital marketplace with its next-generation hotel benchmarking platform and analytical reports. The Kalibri Labs database, updated monthly, is comprised of guest stay records, including cost of customer acquisition and detailed source of business information, from over 30,000 hotels dating back more than 5 years to give an expansive view of the U.S. hotel industry performance.

Read the full press release on Cision PR web

Expedia turns to HomeAway as direct-booking campaigns dent earnings

Expedia’s Q4 earnings missed projections as its stranglehold on the online hotel bookings landscape may be in jeopardy over the effectiveness of hotel direct-booking campaigns, though Expedia CEO Mark Okerstrom is reluctant to admit as much. 

Expedia reported $10.05 billion in revenue for the 2017 fiscal year, missing analyst projections of $10.11 billion. Expedia’s bookings increased 14 percent, or $2.4 billion, reaching $19.8 billion, but the company missed its forecasted revenue goal of $2.36 billion, recording $2.32 billion.

 Expedia missed its quarterly projections once again, but this time it may have more to do with spending than the weather. 

Expedia missed its quarterly projections once again, but this time it may have more to do with spending than the weather. 

Directly Limiting

Hotel companies' push for direct bookings may have had its initial detractors, but a 2017 report from Kalibri Labs, which analyzed the early days of the campaign, showed room night growth from May through Dec. 2016 was up 7.8 percent across 12,000 surveyed hotels, while net revenue for these properties also rose 9.3 percent. 

This data are not the only relevant facts to consider when looking at the impact of direct bookings. During Expedia's Q4 call, Okerstrom said the company's sort order for online searches is pushing bookings toward independent hotels. This could be attributed to Expedia's customers preferring to book by price. If independent hotels are appearing higher on Expedia’s searches, then it stands to reason that the better rates for branded hotels will be found through branded booking channels.

Read the full article on Hotel Management

The Numbers—What Are We Dealing With & Where Are We Headed?

alis-HB.jpg

By Gregg Wallis

LOS ANGELES—This year’s ALIS Conference included a session entitled “The Numbers—What Are We Dealing With & Where Are We Headed?” Leading economic researchers took a look at the industry and presented their findings. Here is a look at what they said.

Carter Wilson, VP of consulting and analytics, STR

According to Carter Wilson, VP of consulting and analytics at STR, 2017 was a great year for the hotel economy. “The hotel economy is very dependent on the overall economy,” he said. “Right now, all of the indicators are very solid. We are looking at low unemployment, strong corporate earnings and moderate inflation levels, so it all played a key in 2017’s performance in the industry. Demand did outpace our estimate in 2017; a lot of that was due to the third and fourth quarters with the impact of the hurricanes and the wildfires. The industry continues to perform at all-time record levels according to every single metric.”

Cindy Estis Green, CEO and co-founder, Kalibri Labs LLC

Cindy Estis Green, CEO/co-founder of Kalibri Labs, took a look at hotel performance in the digital marketplace.

In 2017, the U.S. hotel industry had nearly twice as much business through its brand.com websites at 22.6%, compared to 13.6% booked through online travel agencies (OTAs). In spite of this difference, hotels are still challenged in managing costs of sales, with OTA commissions rising at three times the rate of guest paid revenue and twice the growth of loyalty costs, according to Estis Green.

Read the full article on Hotel Business

Marriott Will Reduce Group & Meetings Commissions

What led us to the decision was trying to balance [intermediaries, customers and owners] and make sure that we make a decision that made good sense for all. … And frankly, it also had to make good economic sense for the business overall.
— Brian King from Marriott International

Marriott International is reducing the commissions it pays to group intermediaries from 10 percent to 7 percent beginning March 31, 2018. The policy change will be a brand standard that will take effect at all managed and franchised properties in the U.S. and Canada.

Marriott global officer of digital, distribution, revenue management and global sales Brian King said the change is a "reset and rethink" moment for the company. "We've been looking at the demand that we're receiving from our customers and the amount of innovation that needs to take place in the group space from an end-user perspective, and then we've also been watching the pace of revenue growth and the pace of commissions, and they're just not commensurate with each other."

The policy may not come as a surprise to many in the meetings and events space, as fears that commissions would change have been growing the past three to four years, particularly in light of industry megamergers. One consultant speaking on background earlier this month, prior to any Marriott news, suggested the company had the power to do away with group and meetings commissions entirely. King, however, said that was never a consideration. "We're very, very committed to intermediaries and our partners, we're committed to our customers and we're committed to our hotel owners," he said. "It's a three legged-stool, and we are trying to strike the right balance that we can appropriately take care of each of those audiences, invest in the hotels appropriately so those customers can have experiences that they desire which will drive demand to our partners." But that consideration also had to make good economic sense for Marriott, he added.

Read the full article on Business Travel News

ALIS Day One: What is the new normal?

Editors recap the opening day of the Americas Lodging Investment Summit with takeaways, quotables and more highlights from the event.

LOS ANGELES—“You’ve got to know when to hold ’em, and know when to sell ’em,” according to a hotel-centric adaptation of the Kenny Rogers classic performed at the opening plenary session of the Americas Lodging Investment Summit.

 ALIS speakers dove into the numbers Monday, talking fundamentals, transaction volume and what to expect in 2018. From left: moderator Rob Kline, Chartres Lodging Group; Carter Wilson, STR; Cindy Estis Green, Kalibri Labs; Mark Wynne Smith, JLL Hotels; and Mark Woodworth, CBRE Hotels. (Photo: Stephanie Ricca)

ALIS speakers dove into the numbers Monday, talking fundamentals, transaction volume and what to expect in 2018. From left: moderator Rob Kline, Chartres Lodging Group; Carter Wilson, STR; Cindy Estis Green, Kalibri Labs; Mark Wynne Smith, JLL Hotels; and Mark Woodworth, CBRE Hotels. (Photo: Stephanie Ricca)

The theme of this year’s ALIS is “Dealing with the new normal,” and opening day speakers started that conversation with a look at the big questions facing U.S. hoteliers in this period of unprecedented continued growth.

“The question is, what is the new normal as we head into 2018?” asked Jim Burba, ALIS chairman and co-founder of Burba Hotel Network, during the conference’s opening plenary session on Monday. “More deals or less? Is it time to sell? Time to build? Time to hold?”

Read the full article on Hotel News Now

5 things to know about direct-booking campaigns

By  Sean McCracken

smccracken@hotelnewsnow.com

@HNN_Sean

In the not-too-distant past, major hotel companies were all-in on various campaigns to let the public know direct channels were the best way to book rooms. Here are some insights into how those now stand.

There was a period not that long ago when entire earnings seasons were dominated by various companies, headlined by heavyweights like Hilton and Marriott International, going to new lengths to secure more direct bookings.

In those companies’ quests to win share back from online travel agencies and other third parties, many engaged in discounted loyalty bookings and other new programs to lure more direct business.

Chatter around those programs has cooled considerably, so Hotel News Now decided to look to some expert sources to take a pulse on where they stand.

Read the full article on Hotel News Now

2017's top hospitality trends

2017-year-in-review-Gettys.jpg

The year has come and gone, and it will remembered as one of uncertain optimsim. Things may be looking up for 2018 as pro-business reforms, such as changes to the tax code, begin to effect change on the industry, but looking back on 2017 we see an industry already in action. Hotels took time this year to adapt to the changing business landscape through partnerships, changes in strategy and a renewed focus on technology. 

Here are the five biggest storylines that took place in 2017...

1. OTA Partnerships and Home-Sharing Legitimization

2. Women in Hospitality

3. Rising Costs and Hidden Fees

4. Design Disruption

5. Safety Under Duress

Read the full article on Hotel Management

Six excellent hotel websites (and how they encourage direct booking)

Online travel agencies (OTAs) have enjoyed huge growth over the past few years, with the majority of consumers now booking hotels and accommodation via third-party sites. 

However, new research from Kalibri Labs suggests that consumer favour could in fact be be shifting, reverting back to brand hotel sites rather than OTAs.

In the analysis of the period of May to December 2016, when the hotels in question ran ‘book direct’ campaigns, Kalibri found a faster rate of growth in hotel site bookings compared to the OTA channel. This was also the case in terms of both revenue and room nights when compared to year before, (and prior to the direct booking campaigns being launched).

So, what makes consumers want to book direct rather than via a third party? Here are some examples of hotel websites I think are getting it right.

The Ritz

The_Ritz_bookingpage.JPG

As one of the most well-known hotels in London, the Ritz largely relies on its prestigious reputation to drive bookings. This means that people might be more inclined to visit its website as a first port of call anyway (as opposed to a third party site). However, the Ritz still encourages direct bookings as often as possible, immediately capturing the user’s attention with a list of benefits (including lowest rates and free calls and internet).

Ritz_3.JPG

Elsewhere, it sets out types of rooms and suites clearly, showcasing the opulence and luxury of the hotel with large and prominent imagery.

The search and booking process itself is quick and easy, with prominent reviews also being used to spur on consumers and encourage bookings.

Ritz_2.JPG

This is perhaps surprising for a luxury hotel like the Ritz, whereby a high level of service is presumed to be standard. However, its inclusion shows how important the advocacy and influence of past customers can be - regardless of hotel heritage.

Hotel Direct-Booking Pushes Really Worked and Owners Were Big Winners

The bigger question, however, is whether these campaigns will still work in 2017 and beyond; offering discounted rates can only last for so long. Hotels need to start thinking about how they can ensure this momentum continues in the long run without having to use discounted rates.
—  Deanna Ting
 Did Hilton succeed in convincing consumers to  “Stop Clicking Around? ” Did Marriott prove “ It pays to book direct “?

Did Hilton succeed in convincing consumers to “Stop Clicking Around?” Did Marriott prove “It pays to book direct“?

According to a new report from Kalibri Labs, they and their peers which launched direct- booking campaigns in 2016 certainly did.

Compiling data from its database of more than 25,000 hotels in the U.S., including validated costs and daily transactions directly sourced from the hotels’ systems, Kalibri Labs found that there was indeed a shift in consumer behavior toward brand.com sites versus online travel agencies such as Booking.com or Expedia. More consumers than ever before chose to book direct versus booking on a third-party site.

Read the full article on Skift